Equity or expense: Comparing owning versus renting an apartment
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Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Authors
Date
2023
Department
Major/Subject
Mcode
Degree programme
Information and Service Management (ISM)
Language
en
Pages
57+4
Series
Abstract
As the inflation has risen the interest rates after COVID-19 pandemic, the housing market has changed radically compared to the past. While general inflation has accelerated, the development of housing prices has stagnated. High interest rates reduce the attractiveness towards buying an apartment which has led to a decrease in apartment sales. As a result of these uncertainty factors, people do not dare to buy apartments for fear of not being able to sell the old one, and as the cycle continues, the housing market stops. Changes in the housing market have affected the profitability of owning an apartment which during low interest rates has been almost undoubtedly profitable. The purpose of this research is to find out whether renting is more profitable than owning a house in this new market situation. The study also considers alternative forms of investment by assuming that a person living in a rental property takes out an investment loan and invests an amount proportional to the loan taken out for the purchase of an owner- occupied apartment in stocks. The research is geographically focused on Finland, and its different postal code areas. The methodology combines quantitative analysis, data modelling and comparative analysis. The research has been carried out using historical data and assumptions that reflect the current market situation. Since the mass of data utilized by the research is so extensive, data collection is also a large part of the research. The results show that owning an apartment in prestigious areas maintains its profitability even during the worse times. The research also shows indications that it is generally more profitable to own an apartment in migration victory municipalities. All in all, the examination by postal code area shows that even within the same city there are differences in profitabilities, which is why examining the characteristics of micro-areas is important when thinking about buying an apartment. More broadly, this study may inspire to investigate the imbalance in the housing market in terms of rents and prices. The equations used in this research can also be utilized to study these same questions in the future using different parameters.Description
Thesis advisor
Leppänen, IlkkaKeywords
housing market, renting, owning, investing, data analysis, apartment